Home

MPs: Protect public from bank failure

Canary Wharf in east LondonCanary Wharf in east London

Tuesday, 16, Sep 2008 11:26

MPs have set out plans to protect savers' cash if another British bank collapses, one year after the Northern Rock debacle and just a day after Wall Street suffered its worst day in recent history.

The parliament Treasury committee has issued a report on banking reforms, claiming the current compensation system for savers – under the Financial Services Compensation Scheme (FSCS) - does not work after the government's consultation on legislation for the future of banking closed yesterday.

John McFall, committee chairman, hit out at the current plans saying the government was muddled and not placing the consumer at the heart of legislation.

"There has been much focus on whether the appropriate compensation limit should be £35,000, £50,000 or £100,000," he said.

"This is irrelevant if we do not possess a deposit protection system that actually works. It is far more important that banks be able to identify who their insured depositors are, and that the FSCS be able to process compensation claims quickly.

"The overarching priority for the FSCS must be to design a simple and confidence-boosting scheme, which does not rely on consumers having an unrealistic knowledge of banking licences, European directives and foreign compensation schemes."

The committee is also calling for the Bank of England to have a greater role in maintaining financial stability, with any body to oversee banks having the same status as the interest rate-setting monetary policy committee (MPC).

Mr McFall said: "The government's proposals for the new Financial Stability Committee of the Bank of England are confused - the Northern Rock fiasco taught us that clear lines of responsibility are important.”

The Treasury committee is also calling the regulator the Financial Services Authority (FSA) to have sole authority on pulling the trigger for any rescue needed for a failing bank.

Yesterday the Association of British Insurers (ABI) responded to the government consultation saying it would hit investors in banks and make it harder for financial firms to raise capital – as the government could more easily take over banks and push cash to savers over investors.

New rules for protecting UK banking will be introduced in February, when temporary legislation brought in when Northern Rock's near collapse expires.


What do you think ?

Name 

Town/Country 

Your email 

Your comment 

Enter the text shown to the right

New jobs channel

The new look politics.co.uk now includes a jobs channel, where you can search for jobs and sign up for our jobs bulletin.

Newsletter

Sign up to politics.co.uk’s daily newsletter and you’ll never miss a key political story again

Opinion Formers

Building Societies Association (BSA)

The Building Societies Association is the trade association for the UK's building societies. It represents its members to those outside the sector on a number of issues.

Public Affairs Jobs

Check out politics.co.uk's new jobs section, for government, public sector and public affairs roles.

politics.co.uk brings you a new monthly roundup of public affairs, government and local government appointments.

Current Vacancies:

Related News

Backbenchers: Leadership has "no explanation" of plans

The Labour party leadership must outline a bold new strategy if a "hammer blow" defeat is to be avoided, a dozen backbench MPs have claimed.

Backbenchers: Leadership has "no explanation" of plans

Related Analysis

Analysis – the politics of recession

Gordon Brown has tied his colours to the mast of Britain's economy. Now the ship is going down, can the prime minister keep his head above water?

Outlook a little grey for Mr Brown

Latest Headlines

Concern over adult retraining courses

Those who have lost their jobs because of the recession and looking to reskill are facing a decline in the number of available courses because of the government's policies, it has been claimed.

Adult learning faces funding shortfall

Conservative tax plans

David Cameron has announced new plans to put money back into the pockets of savers and pensioners in a bid to create a culture of "save, save, save" instead of "spend, spend, spend".

David Cameron announces tax plans